By Edmund Lau, CFA
We’ve come across certain companies with questionable business practices and wanted to share our thoughts to make sure our readers don’t fall victim to these companies and their practices.
Student loan relief companies typically target borrowers who seek income-driven repayment (“IDR”) plans and provide services that they believe borrowers’ “need” help with. For instance:
1- Navigating across the different IDR plans and help filing the appropriate paperwork: These Student loan relief companies offer to file the paperwork on the borrower’s behalf and charge upfront fees that can run into the hundreds of dollars. However, these forms are publicly available and are free to fill out on the Federal Government’s website (studentloans.gov).
Moreover, doing it electronically on the government’s website allows you to also directly link your tax returns from the IRS, allowing for more efficient processing of the application. The online form is fairly straightforward so you shouldn't pay hundreds of dollars for someone to do it for you. However, we see value offering advice as to which IDR plan may be best for you. FitBUX offers this advice for free.
2- Offer "package" including the initial “paperwork filing service” along with other services and fees as part of a more comprehensive package including random things like key ring and luggage protection, every-day grocery services, auto-buying discounts, etc…, which in the end can pile up to fees totaling more than a thousand dollars.
3- These companies will collect monthly fees throughout the repayment term resulting in huge confusion to borrowers. Many borrowers assume these fees are meant to fulfill their IDR payments, when in fact, the monthly fee is going to the pockets of the student loan relief company.
Unfortunately, in many of the reported cases, the borrowers were “left holding the bag.” Complaints to the Federal Trade Commission (“FTC”) against these companies include allegations that borrowers were placed into IDR plans but failed to make payments due to confusion or misguided directions, others who believed that they were enrolled into an IDR plan but remained on the standard 10-year repayment plan instead, and finally borrowers that were completely unaware of the potential tax liability associated with the IDR plans.
What to Watch Out For
1- Avoid companies with aggressive and misleading marketing materials. Some Student loan relief companies send official-looking mailers that appear to look like statements or notices from your loan servicer. Be sure to look at the fine print
2- Watch out for “fluff” press releases from these companies which can come out multiple times each month to generate web traffic. The content can be syndicated through legitimate online media sources so be sure to look out for disclosures.
3- They list a toll-free number where they are available to chat 24 hours a day, 7 days a week. While it sounds convenient at first, this also feels like an insidious way of “baiting” someone to visit their website.
4- Emailing them to find out about their fees and receiving no response (we tried…)
If you are considering contacting a company to help with your student loan repayment strategy, be sure to go with a company that is recommended to you or do your own due diligence...
What You Can Do
1- Check the Better Business Bureau site and see if they are accredited by the BBB and read the reviews that are available (https://www.bbb.org/en/us).
2- Search the FTC’s case database to see if a given company is on the FTC’s radar for complaints and abuses (https://www.ftc.gov/enforcement/cases-proceedings).
3- Check the quality/level of user feedback at a company’s website. Beware of companies with only 5 to 10 user reviews even though they brag of having helped tens of thousands of individuals. If you are curious about how users rate us and our services, check out our user reviews and our Facebook page
When it comes to your student loans, we suggest consulting with experts who work for you and with the best intentions for your future in mind. If you’d like to schedule a free chat with one of our FitBUX coaches, we’re always here to help.